What Is Difference Between Sales Tax And Withholding Tax In Pakistan?
What is Sales Tax?
Sales Tax is the most common type of tax and almost everyone is familiar with this term. Sales Tax is a type of consumption Tax imposed by the government of Pakistan on the sale of goods and services. Usually, law allows the seller to collect funds from the tax from the consumer at the point of sale. It is usually calculated as a percentage of the purchased price of the product. It is imposed on the retail items by the government, paid by the consumer to the retailer. Many consider that the sales tax is a large burden on the low-income earners and also consider the worst type of tax which harms the economy of Pakistan and retards the process of growth and investment in it. it is all about Difference Between Sales Tax And Withholding Tax In Pakistan.
What is Withholding Tax?
Withholding Tax is a type of Income Tax. Withholding Tax is referred to the amount of money that is taken in advance from employee’s income, in order to pay some of the tax that they will owe. In simple words, we can say that a portion or a part of the employee’s tax liability paid by the employer directly to the government. Withholding tax applies to employment income; many jurisdictions also require withholding tax on payments of interest and dividend. For further detail, you must read the below listed key difference between sales tax and withholding tax.
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Difference between Sales Tax and Withholding Tax:
Following are the main points which clear you the difference between the Sales Tax and the Withholding Tax from each other.
| Sales Tax | Withholding Tax |
| Sales Tax is a tax that we pay at the time of purchase of good
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Withholding Tax is a retention tax or a type of income tax
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| Sales Tax is a type of consumption tax imposed by the Government of Pakistan on the sale of goods and services
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Withholding Tax is a type of income tax withheld from employees wages paid by the employer directly to the government
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| Sales Tax comes under indirect taxes such as Excise Duty, Service Tax, Customs Duty, Export Duty etc
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withholding tax are some under direct taxes such as Income Tax, Income from Salary, Income from house property, business or profession, capital gains and other resources etc.
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| Sales Tax is related to VAT (Value Added Tax) SAP configuration is entirely different for both TDs and VAT
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Withholding Tax is related to TDs paid or collected for services rendered by service providers
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